I agree it wasn't Pisani. Could it have been Roth...Tuesday July 25, 6:46 pm Eastern Time
Nortel beats Q2 estimates, raises forecast
(UPDATE: Adds analyst comment para 7, upgrade background para 12-13, optical supply in paras 21-22, updated stock in para 24. In U.S. dollars unless noted.)
By Susan Taylor
OTTAWA, July 25 (Reuters) - Nortel Networks Corp. (NYSE:NT - news)(Toronto:NT.TO - news) said on Tuesday that unabated demand for fiber-optic equipment helped lift second-quarter earnings 20 percent above market expectations.
Nortel, which also boosted sales and profit forecasts for 2000 and 2001, said that its second-quarter profit from operations, excluding one-time charges, rose to $561 million, or 18 cents a share, from $320 million, or 11 cents a share, in the year earlier quarter.
The blasts by the average estimate of 29 brokers polled by First Call/Thomson Financial was a profit of 15 cents a share, mirroring an estimate from IBES forecasting service by 30 brokers of 15 cents per share.
``We're feeling pretty good. Revenue's up 48 percent -- that's two quarters in a row now -- so we've got as much revenue at the half now as we had a couple of years ago for a whole year,'' Nortel chief executive John Roth told Reuters.
Roth also said he is confident Nortel will record sales of ``something in excess of $10 billion'' from its fiber-optic systems in 2000, up from a previous projection of up to $10 billion.
Optical sales in the quarter grew 150 percent over last year, while wireless revenue rose 18 percent and Internet access equipment gained 80 percent.
``I think these are great numbers...they exceeded my expectations,'' said Truc Do, an analyst at Wit Soundview. Do said he would likely raise his share target price from $100 and maintain his strong buy recommendation based on the results.
Including acquisition costs, Nortel reported a net loss of $745 million, or 26 cents a share, compared with a net loss of $258 million, or 10 cents a share, last year.
Second-quarter revenues grew 48 percent to $7.8 billion from $5.3 billion last year.
The company said it expects sales to grow in the low 40 percent range in 2000, up from a previous estimate of 30-35 percent, and earnings per share from operations to grow in the high 30 percent range.
Chief financial officer Frank Dunn also said that in 2001 Nortel will outpace the market growth rate of 20-21 percent and expects revenues and earnings per share from operations increasing in the 30-35 percent range.
Nortel said an 85 percent increase in order input, and 1.35 book-to-bill ratio, was behind the increased forecast.
``If we could get a little bit more momentum in our enterprise business we'd really be firing on all cylinders,'' Roth said during a conference call with analysts.
The results reinforce Nortel's announcement on Monday that it will pump $1.9 billion into more than doubling its fiber-optic manufacturing capacity over the next 18 months, Roth said.
``We've done a much better job of catching up with demand from a lot of our leading customers,'' Roth told Reuters. ``We're still sold out and it looks like we're going to continue to be sold out in this coming quarter as well.''
Roth would not comment on reports that Nortel is in talks to sell its fiber-optics parts business to Corning Inc. Reports suggest that a stock swap worth more than $100 billion would result in Nortel owning more than 50 percent of Corning, while Corning would own the optical parts unit and maintain its independence.
Explosive traffic growth on the Internet is fuelling tremendous demand for fiber-optic network systems that Nortel and rivals such as Lucent Technologies Inc. (NYSE:LU - news) and Cisco Systems Inc. (NasdaqNM:CSCO - news) produce. Those systems can handle greater volumes of voice, data and image information than traditional networks.
Fiber-optic components, critical equipment used in the those networks, includes such devices as pumps, lasers and filters that help push large volumes of data and boost capacity.
Roth told analysts it does not presently face a shortage of optical components from its suppliers, but wants to ensure it can meet its internal demand in the year ahead amid takeovers and mergers in that sector.
``As our choice of suppliers becomes narrowed, we feel it's only wise for us to make sure that we have back-up supplies'' he said during a conference call.
``We want to make sure that as we continue to ramp and grow very rapidly that we continue to have a good choice of supply at these very very high volumes that we're now looking at.''
Nortel said second-quarter sales to phone companies and service providers increased 63 percent in the quarter, while sales to large enterprises added just 4 percent.
Shares in Nortel gained C$3.30 to close at C$120.75 on the Toronto Stock Exchange before the results were released, while the stock closed at 82-1/2, up 2-1/2, on the New York Stock Exchange.
($1 equals $1.47 Canadian) |
